Question

Design a spreadsheet to compute the dollar amount in each of the next 10 years of an initial investment returning a constant annual interest rate. Interest is reinvested each year so that the amount returning interest grows.What is the dollar amount 8 years from now of $500 invested at 7% annual interest? Please round your answer to the nearest cent.

Answer 1

The dollar amount 8 years from now of $500 invested at 7% annual interest is $859.09

Explanation:

In order to calculate the dollar amount 8 years from now of $500 invested at 7% annual interest we would have to calculate the following formula:

dollar amount=PV*(1+r)∧n

According to the given data we have the following:

PV=$500

r=7%

n=8

Therefore, dollar amount=$500*(1+0.07)∧8

dollar amount=$859.09

The dollar amount 8 years from now of $500 invested at 7% annual interest is $859.09